The Investing Year Ahead

[swissie]

On 1/5/2024 at 5:04 PM, swissie said:

Commercial RE in the US is the "soft underbelly" within the RE universe.

 

Plus the mushrooming "financial industry" outside of traditional banking/brokerage. Not subjet to any governemental control/legislation. Flabergasting amounts floating around. All of them highly leveraged.

[Yellowtail]

8 hours ago, swissie said:

Plus the mushrooming "financial industry" outside of traditional banking/brokerage. Not subjet to any governemental control/legislation. Flabergasting amounts floating around. All of them highly leveraged.

Do you have any examples of "...the mushrooming "financial industry" outside of traditional banking/brokerage." that are not subject to any governmental control/legislation?

[Digitalbanana]

11 hours ago, Mike Lister said:

Possibly so, but, I didn't want to get into a debate about the economic pro's and cons of who might win the election.

Me neither, but as a stock investor one cannot ignore the fact the markets tend to go higher in election years.

[Yellowtail]

14 minutes ago, Digitalbanana said:

Me neither, but as a stock investor one cannot ignore the fact the markets tend to go higher in election years.

Why?

 

I think if you look at the number of years the market ends up, versus the number of years it ends down, one might say the opposite. That combined with the fact that the election is at the end of the year, and the new President does not take office until the following year makes the statistic largely meaningless. 

 

Now if they compared market gains in election years verses market gains in non-election years it might be worth looking at. 

 

The market usually ends up, that it usually ends up in election years is not surprising. 

 

[Thailand J]

https://yardeni.com/charts/presidential-cycles/

 

Since 1929, 3rd yr of the presidency terms were the best for stock market, average 14% gain. Whatever that means.

[paddypower]

On 1/8/2024 at 9:07 PM, Mike Lister said:

Possibly so, but, I didn't want to get into a debate about the economic pro's and cons of who might win the election.

God forbid, but that topic will come up, again, soon enough.

[xylophone]

On 1/6/2024 at 11:30 AM, noobexpat said:

I'm 100% equities ...but with +20 years annual expenditure in cash (increasing monthly).

Reasonable spread geographically - maybe 40% USA?

75% trackers and remainder actively managed. No single shares.

Seems like you've got a good mix there Noob, and I especially like the +20 years expenditure in cash tucked away somewhere, something I am now switching to.

 

I and another Investment Advisor started the Managed Funds division for a major NZ bank, and we used index trackers for all of the funds, because of the low fee structure and market returns. We then designed a brochure called "The ??? Investment Guide" (name of the bank withheld) in which we were able to step would-be investors through a process which eventually determined what sort of investor they were (i.e. their risk profile, age and time horizon, amongst other things) and therefore which type of fund they should invest in.

 

The Investment Guide was vetted by external investment advisory companies, lawyers and the banking ombudsman, before being launched into the market.

 

We started the fund with a $100,000 seed capital and I eventually became its Chief Manager, before leaving in 2005, with the Managed Funds standing at just under $2 billion.

 

It seems like there are many guys on here who are stock pickers and good luck to them, however for people like me (76 years of age) who are not earning an income any more, capital preservation is of prime concern, because if my shares tanked, I'd have nothing to fall back on, whereas I see you are building up your reserves – – wise move Noob.

 

PS. In 2003 we attended a presentation put together by a team of "experts" from a particular US bank and the presentation consisted of the benefits of something called a CDO (Collateralised Debt Obligation) which they were trying to persuade us to add to our product armoury, and the presentation was extremely slick I have to say.

 

I remember saying to my other manager friend that I couldn't quite see how this could all work if a certain percentage of the lower rated bonds failed, and his reply was that he couldn't see how it would work either, and this guy was an absolute whizzkid in finance and mathematics, so we decided not to go with this option.

 

For those more interested in CDOs, check out the brilliant movie, "The Big Short" – – mind blowing, but substantially true.

[Mike Lister]

2 minutes ago, xylophone said:

Seems like you've got a good mix there Noob, and I especially like the +20 years expenditure in cash tucked away somewhere, something I am now switching to.

 

I and another Investment Advisor started the Managed Funds division for a major NZ bank, and we used index trackers for all of the funds, because of the low fee structure and market returns. We then designed a brochure called "The ??? Investment Guide" (name of the bank withheld) in which we were able to step would-be investors through a process which eventually determined what sort of investor they were (i.e. their risk profile, age and time horizon, amongst other things) and therefore which type of fund they should invest in.

 

The Investment Guide was vetted by external investment advisory companies, lawyers and the banking ombudsman, before being launched into the market.

 

We started the fund with a $100,000 seed capital and I eventually became its Chief Manager, before leaving in 2005, with the Managed Funds standing at just under $2 billion.

 

It seems like there are many guys on here who are stock pickers and good luck to them, however for people like me (76 years of age) who are not earning an income any more, capital preservation is of prime concern, because if my shares tanked, I'd have nothing to fall back on, whereas I see you are building up your reserves – – wise move Noob.

 

PS. In 2003 we attended a presentation put together by a team of "experts" from a particular US bank and the presentation consisted of the benefits of something called a CDO (Collateralised Debt Obligation) which they were trying to persuade us to add to our product armoury, and the presentation was extremely slick I have to say.

 

I remember saying to my other manager friend that I couldn't quite see how this could all work if a certain percentage of the lower rated bonds failed, and his reply was that he couldn't see how it would work either, and this guy was an absolute whizzkid in finance and mathematics, so we decided not to go with this option.

 

For those more interested in CDOs, check out the brilliant movie, "The Big Short" – – mind blowing, but substantially true.

I'm 74 so wealth preservation is always close to the front of my mind, but not the very front, I like to have some fun in the process! I watched the likes of CGT and PNL for a couple of years and decided I could probably do better than them and with much of the same risk protection built in. On another occasion I looked extensively into trackers which for a younger guy are ideal, less so I feel for somebody my age. When markets fall, I want an escape and trackers don't give me one, the escape for the younger person is of course time which will always work. 

 

One of the problems I see today is the undue influence of US markets on global indices, contagion makes it debatable whether geographic diversification is actually effective to any meaningful extent. I'm currently toying with the idea of covering the globe using six ETF's, I know it can be done with fewer but I think six will give me the exposure I need without being too broad or too concentrated. And because they are ETF's, it's a simple matter to bail from any particular market, if it all goes South. Using ETF's goes against my investing principles in some respects because they make me the FM when I'm not qualified to be one. This is WIP so stay tuned.

 

 

[noobexpat]

59 minutes ago, xylophone said:

Seems like you've got a good mix there Noob, and I especially like the +20 years expenditure in cash tucked away somewhere, something I am now switching to.

 

I and another Investment Advisor started the Managed Funds division for a major NZ bank, and we used index trackers for all of the funds, because of the low fee structure and market returns. We then designed a brochure called "The ??? Investment Guide" (name of the bank withheld) in which we were able to step would-be investors through a process which eventually determined what sort of investor they were (i.e. their risk profile, age and time horizon, amongst other things) and therefore which type of fund they should invest in.

 

The Investment Guide was vetted by external investment advisory companies, lawyers and the banking ombudsman, before being launched into the market.

 

We started the fund with a $100,000 seed capital and I eventually became its Chief Manager, before leaving in 2005, with the Managed Funds standing at just under $2 billion.

 

It seems like there are many guys on here who are stock pickers and good luck to them, however for people like me (76 years of age) who are not earning an income any more, capital preservation is of prime concern, because if my shares tanked, I'd have nothing to fall back on, whereas I see you are building up your reserves – – wise move Noob.

 

PS. In 2003 we attended a presentation put together by a team of "experts" from a particular US bank and the presentation consisted of the benefits of something called a CDO (Collateralised Debt Obligation) which they were trying to persuade us to add to our product armoury, and the presentation was extremely slick I have to say.

 

I remember saying to my other manager friend that I couldn't quite see how this could all work if a certain percentage of the lower rated bonds failed, and his reply was that he couldn't see how it would work either, and this guy was an absolute whizzkid in finance and mathematics, so we decided not to go with this option.

 

For those more interested in CDOs, check out the brilliant movie, "The Big Short" – – mind blowing, but substantially true.

 

Great story mate, thanks for sharing.

[xylophone]

58 minutes ago, Mike Lister said:

I'm 74 so wealth preservation is always close to the front of my mind, but not the very front, I like to have some fun in the process! I watched the likes of CGT and PNL for a couple of years and decided I could probably do better than them and with much of the same risk protection built in. On another occasion I looked extensively into trackers which for a younger guy are ideal, less so I feel for somebody my age. When markets fall, I want an escape and trackers don't give me one, the escape for the younger person is of course time which will always work. 

 

One of the problems I see today is the undue influence of US markets on global indices, contagion makes it debatable whether geographic diversification is actually effective to any meaningful extent. I'm currently toying with the idea of covering the globe using six ETF's, I know it can be done with fewer but I think six will give me the exposure I need without being too broad or too concentrated. And because they are ETF's, it's a simple matter to bail from any particular market, if it all goes South. Using ETF's goes against my investing principles in some respects because they make me the FM when I'm not qualified to be one. This is WIP so stay tuned.

 

 

It would seem as though EFTs could be the answer for you Mike, and as you say are easily traded if markets start to fall, so are a very flexible option.

 

Be careful that you don't fall into the BRICS conundrum, whereby investing in those countries/funds was all the rage before the financial crash, and great things were expected of the returns that could be obtained from investing in these countries/funds, but that was not to be, and a couple of the BRICS funds were closed after the crash. However I have not followed them since and at the moment I know next to stuff all about them because I quit my job as Chief Manager of Investments in 2005 and really haven't kept track of anything to do with investing apart from looking at my own particular very narrow requirements. 

 

However you seem to know your stuff, so all the very best to you.

[Mike Lister]

2 minutes ago, xylophone said:

It would seem as though EFTs could be the answer for you Mike, and as you say are easily traded if markets start to fall, so are a very flexible option.

 

Be careful that you don't fall into the BRICS conundrum, whereby investing in those countries/funds was all the rage before the financial crash, and great things were expected of the returns that could be obtained from investing in these countries/funds, but that was not to be, and a couple of the BRICS funds were closed after the crash. However I have not followed them since and at the moment I know next to stuff all about them because I quit my job as Chief Manager of Investments in 2005 and really haven't kept track of anything to do with investing apart from looking at my own particular very narrow requirements. 

 

However you seem to know your stuff, so all the very best to you.

Thanks. You have done very well in your career, very impressive, I hope you stick  your head in from time to time and give everyone the benefit of your thinking....Swissie I know will appreciate you very much. 

 

One of the things I've learned to appreciate it recent years is that rather than striving to find the best return, be happy with a moderately good one. If CD's offer 6% and you can get 8 or 9%, don't risk it all trying to get to 11 or 12%

 

Another thing I've learned is that whilst cash is a depreciating asset, it depreciates at a much slower rate than a medium high risk fund in a down market. :)

 

 

[Yellowtail]

Another trap is selecting solely to avoid taxes. 

[xylophone]

12 minutes ago, Mike Lister said:

One of the things I've learned to appreciate it recent years is that rather than striving to find the best return, be happy with a moderately good one. If CD's offer 6% and you can get 8 or 9%, don't risk it all trying to get to 11 or 12%

Thank you for your comments, much appreciated and just a point on the paragraph of yours which I've highlighted, which I totally agree with, is the mindset of some investors/general public with regards to investing.

 

I would have fielded many phone calls from "irate" customers, who were not satisfied with the advice my investment advisers had given them, when the returns on our funds were not performing as well as other funds. Trying to explain about index trackers and the fact that the actively managed funds could outperform ours, but in the long run, index trackers were a good steady bet, gave them a market return and were low in fees, sometimes fell on deaf ears.

 

Their fears were somewhat allayed when we were able to show the 10 year plus returns on our passive funds versus an active equivalent – – however some were always chasing the best returns/funds and the churn wasn't always in their favour.

[Digitalbanana]

On 1/9/2024 at 9:28 AM, Yellowtail said:

Why?

 

I think if you look at the number of years the market ends up, versus the number of years it ends down, one might say the opposite.

Maybe but I specifically said US election years - and we are in one now....

[swissie]

On 1/9/2024 at 2:46 AM, Yellowtail said:

Do you have any examples of "...the mushrooming "financial industry" outside of traditional banking/brokerage." that are not subject to any governmental control/legislation?

Do you occasionally read the "Financial Press"?. Wall Street Journal, Financial Times, Neue Zuercher Zeitung, etc etc etc?

[swissie]

I have been known to advocate Dr. Copper as a simplifyed global indicator concerning "economic growth" globally.

As of today, I may have to lessen the importance of Copper as far as a global indicator of economic activity.

Realising that the price of Copper was mainly supported by Chinese imports (construction boom).

Contrary to my expectations, the Chinese economy has not found alternative use of Copper, resembling the former usage during the RE Boom.

Therefore, the price of Copper can not be regarded as a indicator of future global economic activity anymore (the Chinese distortion factor).
------------------------
What could take the future place of a simlified "economic indicator"? As Dr. Copper has lost "importance"?

Please discuss ans supply ideas.  

[Mike Lister]

2 hours ago, swissie said:

I have been known to advocate Dr. Copper as a simplifyed global indicator concerning "economic growth" globally.

As of today, I may have to lessen the importance of Copper as far as a global indicator of economic activity.

Realising that the price of Copper was mainly supported by Chinese imports (construction boom).

Contrary to my expectations, the Chinese economy has not found alternative use of Copper, resembling the former usage during the RE Boom.

Therefore, the price of Copper can not be regarded as a indicator of future global economic activity anymore (the Chinese distortion factor).
------------------------
What could take the future place of a simlified "economic indicator"? As Dr. Copper has lost "importance"?

Please discuss ans supply ideas.  

 

This caught my eye but I have been struggling to think of good alternatives to Dr Copper. 

 

There are lots of traditional indicators such as global PMI or the Baltic Dry Exchange, the latter still being useful, but nothing on par with simplicity of Dr Copper I'm afraid.

 

 https://tradingeconomics.com/commodity/baltic

 

For anyone new to this idea, the following is a reasonable place to start.

 

https://www.thebalancemoney.com/top-economic-indicators-for-global-investors-1979208

 

Personally, I don't think there's any substitute to  reading something specialist such as Bloomberg, which works well for me.

[UKresonant]

On 1/10/2024 at 2:50 PM, Mike Lister said:

I'm 74 so wealth preservation is always close to the front of my mind, but not the very front, I like to have some fun in the process! I watched the likes of CGT and PNL for a couple of years and decided I could probably do better than them and with much of the same risk protection built in. On another occasion I looked extensively into trackers which for a younger guy are ideal, less so I feel for somebody my age. When markets fall, I want an escape and trackers don't give me one, the escape for the younger person is of course time which will always work. 

 

One of the problems I see today is the undue influence of US markets on global indices, contagion makes it debatable whether geographic diversification is actually effective to any meaningful extent. I'm currently toying with the idea of covering the globe using six ETF's, I know it can be done with fewer but I think six will give me the exposure I need without being too broad or too concentrated. And because they are ETF's, it's a simple matter to bail from any particular market, if it all goes South. Using ETF's goes against my investing principles in some respects because they make me the FM when I'm not qualified to be one. This is WIP so stay tuned.

 

 

 

I still slightly prefer Investment Trusts over ETFs with their track record and months of dividend cover held within the Trust. https://www.theaic.co.uk/income-finder/dividend-heroes  I don't pick from this list, but it's re-assuring that quite a few are on it or in the next Gen section! 

(income & growth theme) 

 

 

 

[Mike Lister]

10 minutes ago, UKresonant said:

 

I still slightly prefer Investment Trusts over ETFs with their track record and months of dividend cover held within the Trust. https://www.theaic.co.uk/income-finder/dividend-heroes  I don't pick from this list, but it's re-assuring that quite a few are on it or in the next Gen section! 

(income & growth theme) 

 

 

 

I went through an IT phase and it didn't work out well! They are great for dividend income but their relatively higher in and out costs means you need better than normal performance. I have a chum who went heavily into Baillie Gifford IT's, SM, Edinburgh, Monks etc and was doing great, until he found himself down 50% and he's still way down. Agility is important, I think, plus really big funds tend not to be very nimble.

[connda]

Look at Geo-political events that will likely blow up within the next two years and invest based on the understanding of what a financial effect that will have on global shipping.  Invest accordingly.

[Mike Lister]

4 minutes ago, connda said:

Look at Geo-political events that will likely blow up within the next two years and invest based on the understanding of what a financial effect that will have on global shipping.  Invest accordingly.

Yes, another reason to monitor the Dry Baltic Exchange.

[UKresonant]

Just now, Mike Lister said:

I went through an IT phase and it didn't work out well! They are great for dividend income but their relatively higher in and out costs means you need better than normal performance. I have a chum who went heavily into Baillie Gifford IT's, SM, Edinburgh, Monks etc and was doing great, until he found himself down 50% and he's still way down. Agility is important, I think, plus really big funds tend not to be very nimble.

Yes going with one management group is probably not a good idea. The capital value  volatility does not worry me to much, as long as the dividend and it's growth are reasonably consistent. 

The two portfolios I'm been reviewing over the last 6 months are part of my minority Pension income stream, so once in a nearly hands off medium to low fee portfolio, the smoothed dividends and their growth are that bit of the (hopefully) well indexed pension group.

 

I've heard it said that there was a lot of selection read across on funds and trusts under Ballie Gifford, but I've not had any incidents with them, quite good actually.  Scottish American has has been ok over two years, when I caught it at an abnormal discount on the Day, and I also have one OEIC with them. Their global discovery fund did massively well into Covid but then fell away massively, kinda like SM for perhaps other reasons.

 

There was only one IT I had with another Group, that I got caught with a failure within their selection, not a bad trust, but in hindsight bad entry timing.

 

I will move onto more adventurous investment considerations later. I'll let the wife do all the more adventurous trading out Thailand for now, she is inclined more towards US equities and ETF's rather than my cantering UK, Japan and global Trust / ETF selections

 

 

[Mike Lister]

4 hours ago, UKresonant said:

Yes going with one management group is probably not a good idea. The capital value  volatility does not worry me to much, as long as the dividend and it's growth are reasonably consistent. 

The two portfolios I'm been reviewing over the last 6 months are part of my minority Pension income stream, so once in a nearly hands off medium to low fee portfolio, the smoothed dividends and their growth are that bit of the (hopefully) well indexed pension group.

 

I've heard it said that there was a lot of selection read across on funds and trusts under Ballie Gifford, but I've not had any incidents with them, quite good actually.  Scottish American has has been ok over two years, when I caught it at an abnormal discount on the Day, and I also have one OEIC with them. Their global discovery fund did massively well into Covid but then fell away massively, kinda like SM for perhaps other reasons.

 

There was only one IT I had with another Group, that I got caught with a failure within their selection, not a bad trust, but in hindsight bad entry timing.

 

I will move onto more adventurous investment considerations later. I'll let the wife do all the more adventurous trading out Thailand for now, she is inclined more towards US equities and ETF's rather than my cantering UK, Japan and global Trust / ETF selections

 

 

The US markets represent 50% of the investable world, it is so big that nobody has been able to analyze all the funds successfully in the same way that analysts have in the smaller UK market. Because of this, it makes far greater sense to cover the entire market with an index  tracker or possibly two, rather than trying to identify above average performers. And if that coverage is via an ETF, its quick and easy to get in and out. I think the right coverage for me is an S&P Tracker and based on the economy, a Russell 2000 (small cap) tracker, at that point the US is done and dusted, inexpensively and comprehensibly.

[Mike Lister]

A couple of links may help some:

 

Citywire is extremley useful for fund and fund manager selection

 

https://citywire.com/funds-insider/investments

 

The investor forum below is often worth reading to understand what others are doing and how they view things, there are several highly experienced investors who are members and moderators. My experience is that it's a great place to ask questions but beware, if you state something as fact, you had better be right otherwise members will suddenly appear and destroy you...... it's a no nonsense no BS place.

 

https://forums.moneysavingexpert.com/categories/savings-investments

[Mike Lister]

Asian markets got hit badly during covid, not least because of USD strength and capital outflows. Recovery post covid has also been slower than in the West, plus geo-political risks have weighed heavily. I went underweight Asia for quite some time but fairly recently I increased my holdings, which are India and China heavy. All the major forecasts I've read over the past year estimate that Asia GDP will out perform the West, much of that outperformance being based on the presumption that the US economy would enter recession in 2024. The likelihood of a soft landing now appears more likely but I don't see that will change the forecast for Asian recovery, negatively.

 

My two core fund holdings that cover Asia are FSSA Asia Focus and Invesco Pac. I've held FFSA AF for several years and have recently bought more because it was good value. Invesco is more pricey but it helped to buy the dip in October. Given the sheer size of the region it seems unproductive not to be invested here, through thick and thin.

[FruitPudding]

On 1/2/2024 at 10:30 AM, Neeranam said:

I wouldn't invest in the S&P now because market movements are influenced by a complex interplay of  factors, and predicting the exact direction of the market is challenging. Diversification and a long-term investment strategy are what I would do. 

Economic downturn due to war, rising interest rate, war, inflation, no thanks. 

 

 

 

 

Aren't you like 100% in Bitcoin, lol?

[swissie]

On 1/14/2024 at 12:38 AM, Mike Lister said:

Asian markets got hit badly during covid, not least because of USD strength and capital outflows. Recovery post covid has also been slower than in the West, plus geo-political risks have weighed heavily. I went underweight Asia for quite some time but fairly recently I increased my holdings, which are India and China heavy. All the major forecasts I've read over the past year estimate that Asia GDP will out perform the West, much of that outperformance being based on the presumption that the US economy would enter recession in 2024. The likelihood of a soft landing now appears more likely but I don't see that will change the forecast for Asian recovery, negatively.

 

My two core fund holdings that cover Asia are FSSA Asia Focus and Invesco Pac. I've held FFSA AF for several years and have recently bought more because it was good value. Invesco is more pricey but it helped to buy the dip in October. Given the sheer size of the region it seems unproductive not to be invested here, through thick and thin.

Yes it's Asia. The US and Europe is very "ripe" with too much good news already priced in. With the exeption of Brasil, South America hasen't been able to "take off" for the last 300 years. Africa has potential, but stifeled by corruption as a accepted way of life by the population.

Yes it's Asia. Surely, China has a few propbems, not sure how they will adress those problems at this time. But not to forget: While in Western Democracies it takes weeks, months, years of debate to rectify major economic problems, the Chinese political system allowes for drastic remedies within 48 hours. In todays fast changing world a tremendeous advantage.

The Taiwan question: The Chinese are awaiting the next US presidential election. Knowing that a president Trump will do nothing for the defense of Taiwan. Thus setteling the matter quickly. It remains a "wild card" though.

[noobexpat]

I just added to my ishares asia pacific excluding japan fund.

Been doing global trackers lately which are all 50-60% USA. 

Bit of a geography change - about as scientific as i get.

[Mike Lister]

4 minutes ago, noobexpat said:

I just added to my ishares asia pacific excluding japan fund.

Been doing global trackers lately which are all 50-60% USA. 

Bit of a geography change - about as scientific as i get.

My iShares Japan is up 5% in ten days, it's worth a look.

 

Yes, that's the problem with global trackers, always US heavy. It makes sense to cover off the US with a single index tracker and then sort out the rest of global in discrete chunks, that way you can better control the US percentage. 

 

[noobexpat]

10 minutes ago, Mike Lister said:

My iShares Japan is up 5% in ten days, it's worth a look.

 

Yes, that's the problem with global trackers, always US heavy. It makes sense to cover off the US with a single index tracker and then sort out the rest of global in discrete chunks, that way you can better control the US percentage. 

 

 

Japan looks like its had a nice run lately, my one has been flat for a whole year ...so i went with the flat one 55

 

Seem to have so much fund cross-over on that taiwan semi-conductor place!